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Geospace Technologies Falls on Q1 Loss, Revenues Dip Y/Y - Analyst Blog

Shares of Geospace Technologies Corporation ( GEOS ) slumped 5% on Feb 4 after the company reported dismal first-quarter 2015 results. The company incurred a loss of 41 cents per share, wider than the Zacks Consensus Estimate of a loss of 10 cents. Reported loss also compared unfavorably with the year-ago quarter earnings of $1.85 per share.

Quarter Details

Geospace Technologies' first-quarter revenues came in at $21.2 million, down 79.1% on a year-over-year basis. Reported revenues also lagged the Zacks Consensus Estimate of $28 million. Lower-than-expected demand for its products and decrease in Seismic and Non-Seismic segments unfavorably impacted quarterly revenues.

Revenues from reservoir products decreased 93% from the year-ago quarter and came in at $2.2 million. During the quarter, the company did not witness any permanent reservoir monitoring (PRM) contracts, which resulted in lower-than-expected revenues. Traditional exploration products decreased 62.3% from the year-ago quarter, whereas revenues from Wireless exploration products decreased 87.5% on a year over year basis.

Revenues from non-seismic products decreased 8.1% from the year-ago quarter and came in at $5.4 million.

Geospace Technologies' gross loss during the quarter came in at $21 million as against a gross profit of $47.1 million in the year-ago quarter. Lower product gross margins, low factory efficiency and rental fleet operations along with lower revenue base dragged down the quarter's gross results.

The company's operating expenses decreased 13.6% from the year-ago quarter, primarily due to lower selling general and administrative expenses and research and development expenses. However, as a percentage of revenues, operating expenses increased from 11.3% reported in the year-ago quarter to 46.6%, primarily due to higher stock price compensation expenses and higher staffing costs. This in turn negatively impacted operating results. Operating loss came in at $9.9 million, which deteriorated from an operating income of $35.7 million reported in the year-ago period.

Geospace Technologies' net loss came in at $5.4 million or 41 cents per share as against an income of $24.2 million or $1.85 per share reported in the year-ago quarter.

Geospace Technologies exited the first quarter with cash and cash equivalents and short-term investments of $49.9 million compared with $53.2 million in the previous quarter. Receivables were $13.4 million versus $24.6 million in the prior quarter. The company did not have any long-term debt for the current quarter. Net cash used during the quarter was $1.4 million.

Outlook

Management expects a significant decline in seismic products gross profit margins in fiscal 2015 due to lower manufacturing activity. Also, management expects capital expenditures in fiscal 2015 for the Pinemont facility in the range of $1 million to $5 million, down from the previous prediction of $15 million.

Conclusion

Geospace Technologies reported dismal first quarter results. The company's loss per share was wider than the Zacks Consensus Estimate. Revenues also missed the same. The year-over-year comparisons were unfavorable on both counts, primarily due to lower-than-expected demand from its product sales and declines in Seismic and Non-Seismic segments.

The company primarily deals in manufacturing and selling of instruments and equipment used by the oil and gas industry. The company helps its customers in the acquisition and processing of seismic data as well as in reservoir characterization and monitoring activities. We believe that the company's product launches (especially PRM products) and high value contract wins will boost revenues, going forward.

However, competition from companies like Amphenol Corporation ( APH ) and CGG ( CGG ) remains a concern for the company.

Currently, Geospace Technologies has a Zacks Rank #4 (Sell).

Investors can consider Rambus Inc. ( RMBS ) instead, which has a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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